Israel: The Status Of Insurance Policy Confirmation

The Israeli non-life Insurance Market uses an additional
document to the Insurance Policy issued to the Insured. This
document is called Insurance Policy Confirmation (hereinafter:
I.P.C.) which is issued at the request of the Insured. The I.P.C.
is usually requested by Third Parties which enter into commercial
contract with the Insured. For instance: a landowner requires an
I.P.C. from its tenant.The entrepreneur of a
project requires an I.P.C. from the various contractors and
subcontractors.

The question of the correlation between I.P.C. and the
Policy issued to the Insured was hardly tested in
Court.

In a recent precedent, the Supreme Court determines that
such I.P.C. should be examined as an inherent part of the Policy
extending the coverage afforded by a separate
document.

The I.P.C. was issued on behalf of
the owner of the property and not on behalf of the lessee. Only the
lessee was found liable for the occurrence and for the damage,
therefore the I.P.C. does not apply.

The I.P.C. was added to the Third
Party liability Policy in the former insurance period. When issued
it intended to cover the liability of contractors who were retained
by the lessee to carry out contract works. The I.P.C. was not
extended to cover an additional insurance period, and therefore it
had expired before the accident.

The Court rejected Insurer's allegation and ruled that the
I.P.C. extended the insurance cover for any injured Third Party and
is valid also during the additional insurance period.

Background:

On 25th November 2004, Mr. Vizman (an air-conditioning
technician) passed away as a result of suffering an electric shock
whilst repairing the air-conditioner in a shop located in Haifa.
The owner of the property – "Beit Hakranot" –
leased the shop to Mrs. Dar, who in turn sub-leased the shop to a
company named Atraktzia in the City (2000) Ltd. (hereinafter:
Atrakzia).

According to the claim, the deceased was retained by Atrakzia to
repair and replace the air-conditioner installed in the shop
ceiling, above the fitting rooms. The District Court determined
that the deceased was electrocuted, due to one of the fitting
room's metal bars touching a live electric wire, whereas the
light fixtures in the fitting rooms were not grounded. Menora
Insurance Co. Ltd. (hereinafter: the Insurer)
insured Atrakzia under a Third Party Liability Policy and in
addition issued in the preceding insurance period, to the owner of
the property – Beit Hakranot – an I.P.C. extending the
cover to include Third Party liability cover for contractors and
their employees.

The Insurer argued that the Policy issued to Atrakzia in the
relevant period excluded accidents to contractors retained to
perform contract works on the property. A similar exclusion existed
in the previous insurance year, however, in the previous year, the
Insurer agreed, at the request of the property owner to issue an
I.P.C. which extended the Policy cover to contractors and their
employees. The Insurer argued that the I.P.C. was relevant only
during the first period of insurance and cannot apply to the second
period of insurance during which the above accident occurred. The
District Court denied the Insurer's argument and determined
that if the Insurer intended to terminate the extended coverage, it
should have provided an explicit notice to Atrakzia and to Beit
Hakranot. However, as the Policy was renewed without such notice,
de facto, the Insurer renewed the I.P.C. as well. In light
of the above, the Court ruled that the Insurer should compensate
Plaintiffs according to the Policy.

The Appeal:

The Insurer filed an appeal on the above judgment claiming
similar arguments used in the District Court.

Discussion and Decision:

On 18th February 2016 the Supreme Court handed down a judgment
denying the Civil Appeal filed by the Insurer ruling as
follows:

The owner of the property shall not
be held liable for the risks in the property created by the holder
of the property, without the owner knowing and/or being aware of
these hazards.

The property was under the control
and supervision of the lessee Mrs. Dar. As the deceased passed away
due to permanent defects in the property which could have been
revealed in a reasonable manner, Mrs. Dar should bear partial
liability for the occurrence.

Regarding the two arguments presented
by Insurers: the Supreme Court stated as follows:

I.P.C. is not a separate document which establishes separate
insurance liability and cannot be disconnected from the Policy
issued to Atrkzia. The I.P.C. confirms the existence of insurance
and it may include extension of cover to the Policy. In this case
it extended the cover to "Beit Hakranot" as a direct
insured and provided cover for contractors and their employees.
Such extension is valid towards any Third Party, regardless to whom
the I.P.C. was addressed.

With reference to the second argument raised by Insurers, the
Supreme Court repeated the ruling of the District Court. It stated
that as Insurers failed to provide a notice regarding the
termination date of the I.P.C. thus when the Policy was renewed for
an additional period the terms and the extension provided in the
first policy period continue to apply.

In light of the above, the Supreme Court held that Insurers are
liable for the occurrence and should compensate Plaintiffs for the
liability which was attributed to Atrakzia.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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